Correlation Between APA and VFCO34
Can any of the company-specific risk be diversified away by investing in both APA and VFCO34 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining APA and VFCO34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and VFCO34, you can compare the effects of market volatilities on APA and VFCO34 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in APA with a short position of VFCO34. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and VFCO34.
Diversification Opportunities for APA and VFCO34
Very good diversification
The 3 months correlation between APA and VFCO34 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and VFCO34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VFCO34 and APA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on APA Corporation are associated (or correlated) with VFCO34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VFCO34 has no effect on the direction of APA i.e., APA and VFCO34 go up and down completely randomly.
Pair Corralation between APA and VFCO34
Assuming the 90 days trading horizon APA Corporation is expected to under-perform the VFCO34. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.25 times less risky than VFCO34. The stock trades about -0.04 of its potential returns per unit of risk. The VFCO34 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,383 in VFCO34 on September 26, 2024 and sell it today you would lose (653.00) from holding VFCO34 or give up 8.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 72.67% |
| Values | Daily Returns |
APA Corp. vs. VFCO34
Performance |
| Timeline |
| APA Corporation |
| VFCO34 |
APA and VFCO34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and VFCO34
The main advantage of trading using opposite APA and VFCO34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, VFCO34 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in VFCO34 will offset losses from the drop in VFCO34's long position.The idea behind APA Corporation and VFCO34 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| VFCO34 vs. Under Armour | VFCO34 vs. Guararapes Confeces SA | VFCO34 vs. Pettenati SA Industria | VFCO34 vs. Aeris Indstria e |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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